Your New Year’s Merchant Account Checklist

Time To Take A Step Back

If you're like most merchants, you'd rather not think about credit card processing. However, that indifferent attitude is exactly what unethical providers are counting on when they slip undisclosed fees and automatic renewals into your contract. You can save yourself a lot of future headaches by taking a moment to quickly evaluate your current payment processing solution.

To help guide your thinking, we've provided the following new year's merchant account checklist. This list is meant to give you a set of priorities as you rethink your current processing solution. Feel free to modify it according to your business's needs or to disregard certain parts of it entirely—the goal is simply to get you thinking independently about how your payment processing could be better during the next 12 months!

1. Ignore Sales Agents

If you're concerned that you're paying too much, then you can be sure that other merchants are feeling the same way. Sales agents are aware of this phenomenon, and they will come calling in an effort to capitalize on your post-holiday dissatisfaction. Whether you encounter online ads, friendly referrals, telemarketing calls, or in-store salespeople in these early weeks, we have one piece of advice: tune them out.

To be clear, there's nothing wrong with sales agents trying to pitch their services. The credit card industry in particular thrives on old-school marketing such as cold calls and door-to-door sales. However, low-rated providers rely on sketchy sales tactics like “slamming,” which increases your risk of getting scammed by a deal that sounds too good to be true. Don't let your anger over your December statement push you to sign a contract with a new, even worse provider. That approach is the worst possible thing you can do to kick off the new year.

There is a time and a place for soliciting sales pitches. For now, stick to your own research and consider all of your options.

2. Calculate Your Costs

The biggest concern for most merchants is their bottom line. Your current merchant account provider likely earned your business by claiming to offer the lowest rates, so it's time to find out whether they are delivering. To begin, you should pull out your contract and compare its listed rates to the rates shown on your December statement. Have your rates increased? Are there new fees that you did not agree to? If so, your provider has some explaining to do.

Another helpful exercise is to calculate your effective rate. This is a simple process: simply take your total amount billed for the month of December and divide it by the total December credit card sales volume listed on your statement. The resulting percentage is your actual overall cost for processing payments, and it's likely higher than your per-transaction rates. This is because it includes one-time and recurring fees on top of your per-transaction fees. However, it should still seem reasonable to you. Typically, standard-risk businesses on a competitive pricing plan will have effective rates that fall between 3% and 5%, while high-risk or e-commerce businesses can expect slightly higher percentages. The effective rate is highly variable depending on each merchant's business type, but a large gap between your per-transaction rates and your effective rate can be a strong indicator that hidden fees or high markups are inflating your monthly statements.

Finally, identify any costs that may not be reflected on your statement but are still related to payment processing, such as hardware costs, software costs, and network costs. Are you paying for applications or features that you don't really use? Are you constantly replacing equipment or paying for upgraded internet service? Are you leasing your credit card terminals for a high monthly fee (we almost never recommend this)? These costs could potentially be minimized with a different provider, so it's worthwhile to understand whether you are getting a reasonable return on them.

If you want to save time on this step, we recommend seeking an independent statement audit to find and eliminate hidden fees. Our team will spot overcharges in your monthly statement, negotiate directly with your provider to get them removed, and monitor your future statements to prevent any sneaky tricks moving forward.

3. Assess Your Current Products And Service

If you take costs out of the equation—which is hard to do, we know—are you happy with your processing solution? This can be a difficult question to answer, because most of us simply adapt to whatever credit card processing system we have. But it's a useful exercise to think about how your payment processor fits into your business's daily flow. Do you have all of the tools you need to collect payments? Are certain features lacking or hard to use? Can you imagine a feature that would dramatically improve the way you do business, such as QuickBooks integration or recurring billing?

If you run a retail or restaurant business, employee feedback here is invaluable. Any cashier or server can immediately tell you how user-friendly a system is, where it fails, what it does well, and how it costs you sales. There is no shortage of unique and innovative point-of-sale systems out there, so don't be afraid to consider switching to a system that is a better fit for you.

This is also a good time to think about your experience with this processor overall. Have they been proactive in assisting you? Are they easy to contact? Or has it been one unresolved problem after another? If you don't have much of an opinion about your provider, that's usually a good sign, because it means that their system has been functioning smoothly behind the scenes. However, if you have their customer service department on speed dial, it might be time to shop around.

4. Contact Customer Support

If you proceeded through the first three steps of this checklist without uncovering any problems with your current processor, congratulations! You're probably with a great provider that will serve you well for the rest of the year. However, if you happened to find some surprising fees or subpar products during your assessment, then it's time to see if your current processor can do something about it.

The best merchant account providers pride themselves on customer retention. If your provider is flexible and willing to listen, that's a good sign that they aren't a “churn and burn” operation that plans to replace you with a different sucker tomorrow. As long as you contact your customer service department with clearly stated concerns and questions, then they should make an effort to accommodate you within a reasonable timeframe. Whether they know it or not, this call is their audition for the right to keep your business.

Reliable customer service is such a rarity in the credit card processing industry that it can sometimes make up for higher fees or outdated products. Billing departments do genuinely make mistakes, and faulty equipment can be swapped out if necessary. If your processor goes the extra mile to satisfy your concerns, then you should certainly give them credit. If they blow you off or give you the runaround, however, it's time to kick them to the curb.

5. Review Your Contract Terms

Before you look into other merchant account options, you should first review the cancellation policy outlined in your current contract. Some contracts run for multiple years and will impose a large termination fee if cancelled early, while others are month-to-month and can be cancelled without a fee at any time. Similarly, you may be locked into a multi-year equipment lease that, if cancelled early, will require you to pay the full balance remaining on the lease term in one lump sum. You don't want to open a new merchant account (and therefore violate your current contract) only to learn that you now owe thousands of dollars in termination fees.

Proper cancellation typically requires you to notify your provider of your intention to cancel within 30 to 90 days of the contract's original expiration date. Many contracts will automatically renew for another term if you fail to provide this notification within the designated time frame, so you need to be absolutely certain that you understand the process they require. If your window for cancellation is still a few months away, you should note the date and set a reminder to resume the shopping process once it approaches. Alternatively, you can attempt to cancel your merchant account without paying a termination fee.

Sometimes, your new provider will offer to pay your termination fees with your current provider in order to win your business. You should be sure that this offer does not come with strings attached, as many providers will impose their own termination fee as a condition for paying a previous early termination fee.

6. Research New Providers

If you have decided that you are paying too much money for too little value, and if your processor has not tried to correct the situation, then it is time to start researching new providers. Generally speaking, we advise you to begin by reading Fee Sweep so that you understand how the industry works. Then, you should revisit step three of this list and start looking for providers that are the right fit for your business type. From there, you can narrow the list based on merchant reviews and start negotiating competitive rates with your chosen provider. A full outline of our recommended shopping process can be found in our guide for choosing the right merchant account provider for your business, and our list of the top all-purpose processors can be found here.

CPO is the industry leader in unbiased, up-to-date reviews, but there are other resources on the web that can help round out your perception of a company. We encourage you to make the use of all of the information at your disposal and make multiple providers compete against each other in order to secure the best deal.

Start The Year Off Right

Here's hoping this year brings you more customers, more sales, and more profits. An affordable credit card processing solution can ensure that you maximize those profits, while a shoddy provider can erase your growth entirely. By taking an hour or two to check up on the state of your payment processor, you can position yourself well for the next 12 months.

Have high fees forced you to switch processors this year? Tell us about it in the comment section below: